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A stinging polemic that traces the destructive monopolization of the Internet by Google, Facebook and Amazon, and that proposes a new future for musicians, journalists, authors and filmmakers in the digital age.
Move Fast and Break Things is the riveting account of a small group of libertarian entrepreneurs who in the 1990s began to hijack the original decentralized vision of the Internet, in the process creating three monopoly firms — Facebook, Amazon, and Google — that now determine the future of the music, film, television, publishing and news industries.
Jonathan Taplin offers a succinct and powerful history of how online life began to be shaped around the values of the men who founded these companies, including Peter Thiel and Larry Page: overlooking piracy of books, music, and film while hiding behind opaque business practices and subordinating the privacy of individual users in order to create the surveillance-marketing monoculture in which we now live.
The enormous profits that have come with this concentration of power tell their own story. Since 2001, newspaper and music revenues have fallen by 70 percent; book publishing, film, and television profits have also fallen dramatically. Revenues at Google in this same period grew from $400 million to $74.5 billion. Today, Google’s YouTube controls 60 percent of all streaming-audio business but pay for only 11 percent of the total streaming-audio revenues artists receive. More creative content is being consumed than ever before, but less revenue is flowing to the creators and owners of that content.
The stakes here go far beyond the livelihood of any one musician or journalist. As Taplin observes, the fact that more and more Americans receive their news, as well as music and other forms of entertainment, from a small group of companies poses a real threat to democracy.
Move Fast and Break Things offers a vital, forward-thinking prescription for how artists can reclaim their audiences using knowledge of the past and a determination to work together. Using his own half-century career as a music and film producer and early pioneer of streaming video online, Taplin offers new ways to think about the design of the World Wide Web and specifically the way we live with the firms that dominate it.
I thought I was going to write the story of a culture war. On one side were a few libertarian Internet billionaires—the people who brought you Google, Amazon, and Facebook—and on the other side were the musicians, journalists, photographers, authors, and filmmakers who were trying to figure out how to continue to make a living in the digital age. I have spent much of my life producing music and movies for artists such as Bob Dylan and The Band, George Harrison, and Martin Scorsese, to name a few, and the future of the media in which I worked—not to mention the role of the artist in our society—is important to me. I was lucky enough to start out at a time when an artist could make a decent living by making music or a movie, and as a partner in this work, I succeeded, too. But those days are over. Since 1995—the last time I produced a movie (To Die For)—the digital distribution of most popular forms of art has reinforced the popularity of a small group of artists and cast almost all others into shadow. To be a young musician, filmmaker, or journalist today is to seriously contemplate the prospect of entering a profession that the digital age has eroded beyond recognition.
The deeper you delve into the reasons artists are struggling in the digital age, the more you see that Internet monopolies are at the heart of the problem and that it is no longer a problem just for artists. The Web has become critical to all of our lives as well as the world economy, and yet the decisions on how it is designed have never been voted upon by anyone. Those decisions were made by engineers and executives at Google, Facebook, and Amazon (plus a few others) and imposed upon the public with no regulatory scrutiny. The result is what President Obama calls "a Wild West" world without privacy or security that leaves every citizen vulnerable to criminal, corporate, and government intrusion. As Obama wrote in The Economist, "a capitalism shaped by the few and unaccountable to the many is a threat to all."
The Internet is changing our democracy, too: in Twitter, Donald Trump found the perfect vehicle for his narcissistic personality, allowing him to strike out at all his perceived tormentors. And Facebook (the primary news source for 44 percent of Americans) was equally responsible for the Trump victory, according to Ed Wasserman, the dean of the University of California, Berkeley, Graduate School of Journalism: "Trump was able to get his message out [on Facebook] in a way that was vastly influential without undergoing the usual kinds of quality checks that we associate with reaching the mass public." Facebook was flooded with fake news stories, and BuzzFeed reported that "in the final three months of the US presidential campaign, the top-performing fake election news stories on Facebook generated more engagement than the top stories from major news outlets such as the New York Times, Washington Post, Huffington Post, NBC News, and others." As Ian Bremmer, president of the Eurasia Group told the New York Times, "If it wasn't for social media, I don't see Trump winning." But the libertarians who control the major Internet firms do not really believe in democracy. The men who lead these monopolies believe in an oligarchy in which only the brightest and richest get to determine our future. Peter Thiel, the first outside investor in Facebook and cofounder of PayPal, thinks the major problem of American society is its "unthinking demos": the democratic public that constrains capitalism. Thiel told Wall Street Journal columnist Holman W. Jenkins that only 2 percent of the populace—the scientists, entrepreneurs, and venture capitalists—understand what is going on and "the other 98 percent don't know anything."
What I mistook as only a culture war is an economic war. It is likely only a preview of American capitalism in the digital age. The Economist, in a special issue on American monopoly capitalism entitled "Winners Take All," editorialized that perhaps "firms are abusing monopoly positions, or using lobbying to stifle competition. The game may indeed be rigged." They went on to suggest that what was needed was a major reform effort that "would involve more active, albeit cruder, antitrust actions. It would start a more serious conversation about whether it makes sense to have most of the country's data in the hands of a few very large firms. It would revisit the entire issue of corporate lobbying, which has become a key mechanism by which incumbent firms protect themselves." Monopoly, control of our data, and corporate lobbying are at the heart of this story of the battle between creative artists and the Internet giants, but we need to understand that every one of us will stand in the shoes of the artist before long. Musicians and authors were at the barricades first because their industries were the first to be digitized. But as the venture capitalist Marc Andreessen has said, "Software is eating the world," and soon the technologists will be coming for your job, too, just as they will continue to come for more of your personal data.
The rise of the digital giants is directly connected to the fall of the creative industries in our country. I would put the date of the real rise of digital monopolies at August of 2004, when Google raised $1.67 billion in its initial public offering. In December of 2004, Google's share of the search-engine market was only 35 percent. Yahoo's was 32 percent, and MSN was at 16 percent. Today, Google's market share is 88 percent in the United States and higher in the rest of the world. In 2004 Amazon had net sales revenue of $6.9 billion. In 2015 its net sales revenue was $107 billion, and it now controls 65 percent of all online new book sales, whether print or digital. In those eleven years, a massive reallocation of revenue—perhaps $50 billion per year—has taken place, in which economic value has moved from the creators of content to the owners of monopoly platforms.
Since 2000, US recorded music revenues have fallen from $19.8 billion to $7.2 billion per year. Home-video revenue has fallen from $21.6 billion in 2006 to $18 billion in 2014. US newspaper advertising revenue has fallen from $65.8 billion in 2000 to $23.6 billion in 2014. The Pointer Institute estimates that "Facebook has sucked well over $1 billion out of print advertising budgets for US newspapers" in 2016. While book publishing revenues have remained flat, this is mostly because an increase in children's book sales has made up for the almost 30 percent fall in sales of adult titles. During that same period (2003–2015), Google revenue grew from $1.5 billion to $74.5 billion. According to Adweek, Google, as of 2016, is the largest media company in the world, collecting "$60 billion in U.S. ad spend—a figure 166 percent larger than [the] No. 2 ranking… Walt Disney Company." Google's dominance in online advertising means that its revenue dwarfs the ad revenue collected by a TV giant like Walt Disney, which controls ABC, ESPN, and the Disney Channel. And because Google has such a large share of advertising revenue, global brands are paying the company (and Facebook) a premium, which of course is passed on to consumers in the form of higher prices.
The astonishing and precipitous decline in revenue paid to content creators has nothing to do with the idea that people are listening to less music, reading less, or watching fewer movies and TV shows. In fact all surveys point to the opposite—the top-searched Google items are all about entertainment categories. It is not a coincidence that the rise of digital monopolies has led to the fall of content revenues. The two are inextricably linked.
The five largest firms in the world (in terms of market capitalization) are Apple, Google (now referred to as Alphabet), Microsoft, Amazon, and Facebook. It is hard to grasp just how large a role these five tech giants play in our economy, but look at this comparison of the world's largest companies in 2006 versus today.
But the change is more profound than just market capitalization. Not since the turn of the twentieth century, when Theodore Roosevelt took on the monopolies of John D. Rockefeller and J. P. Morgan, has the country faced such a concentration of wealth and power. Peter Orszag and Jason Furman, economic advisers to President Obama, have argued that the fortunes created by the digital revolution may have done more to increase economic inequality than almost any other factor. Despite Marc Andreessen's and Peter Thiel's belief that the outsize gains of tech billionaires are the result of a genius entrepreneur culture, inequality at this scale is a choice—the result of the laws and taxes that we as a society choose to establish. Contrary to what techno-determinists want us to believe, inequality is not the inevitable by-product of technology and globalization or even the lopsided distribution of genius. It is a direct result of the fact that since the rise of the Internet, policy makers have acted as if the rules that apply to the rest of the economy do not apply to Internet monopolies. Taxes, antitrust regulation, intellectual property law—all are ignored in regulating the Internet industries. The digital monopolists have argued for free rein in pursuit of efficiency. But as Barry Lynn and Phillip Longman have written, "The evidence is close to irrefutable that adoption of this philosophy of 'efficiency' unleashed a process of concentration that over the last generation has remade almost the entire U.S. economy, and is now disrupting our democracy." Clearly the increasing concentration of market share in the hands of a few US corporations ranges far beyond the tech sector, as Senator Elizabeth Warren pointed out in a speech she gave in June of 2016:
In the last decade, the number of major U.S. airlines has dropped from nine to four. The four that are left standing—American, Delta, United, and Southwest—control over 80% of all domestic airline seats in the country.… A handful of health insurance giants—including Anthem, Blue Cross Blue Shield, United Healthcare, Aetna, and Cigna—control over 83% of the country's health insurance market.… Three drug stores—CVS, Walgreens, and Rite Aid—control 99% of the drug stores in the country. Four companies control nearly 85% of the U.S. beef market, and three companies produce almost half of all chicken.
While acknowledging the problem of increased concentration of power in the hands of a few giants across all US industries, I am going to focus here on the industry I have spent my life in—media and communication. In this world the relentless pursuit of efficiency leads Google, Amazon, and Facebook to treat all media as a commodity, the real value of which lies in the gigabytes of personal data scraped from your profile as you peruse the latest music video, news article, or listicle. But the people who make the work that drives the Internet are critical to our understanding of who we are as a civilization.
Throughout history the artist has pointed out the injustices of society. The philosopher Herbert Marcuse wrote that the role of art in a society is "in its refusal to forget what can be" (the italics are mine). The history of art is the history of subversion, of a person like Galileo saying that everything you know is wrong. The transcendentalism of Emerson and Thoreau in the 1830s was the first "great refusal"—the refusal to accept slavery and American imperialism—which thirty years later produced Lincoln's Emancipation Proclamation. This pattern of artists being in the vanguard of progress has been repeated numerous times in our history (and the history of many nations), and while rebel artists have always had to deal with "the suits" who control the channels of distribution, the coming of the Internet monopolies has placed all of us in the vulnerable position that the artist alone used to occupy. The concentration of profits in the making of art and news has made more than just artists and journalists vulnerable: it has made all those who seek to profit from the free exchange of ideas and culture vulnerable to the power of a small group of powerful patrons. Even Google's chairman, Eric Schmidt (and his coauthor Jared Cohen), acknowledged this when they wrote, "We believe that modern technology platforms, such as Google, Facebook, Amazon and Apple, are even more powerful than most people realize, and our future world will be profoundly altered by their adoption and successfulness in societies everywhere."
Martin Luther King Jr. delivered a sermon at the National Cathedral in Washington, DC, less than a week before his assassination, in 1968. He asserted that although we were embarking on a technological revolution, many were blind to the changes it would bring, and without some sort of moral framework we would have what he once referred to as "guided missiles and misguided men." He said:
One of the great liabilities of life is that all too many people find themselves living amid a great period of social change, and yet they fail to develop the new attitudes, the new mental responses, that the new situation demands. They end up sleeping through a revolution.
Think about the fact that Dr. King, with all the battles he believed still lay before him—civil rights, the Vietnam War, poverty—sought to focus our attention on the role technology might play in our future. King had no way of envisioning the addictive nature of the Internet, a place where we would be willing to share our most intimate secrets with a faceless corporation whose business model is to get into our heads and harvest our attention. And as any parent of a teenager who sleeps with a smartphone will agree, one hardly needs to be awake to interface with Google or Facebook. We continue to surrender more of our private lives believing in the myth of convenience bequeathed to us by benign corporations. As Kevin Kelly, the founding editor of Wired, remarked, "Everything will be tracked, monitored, sensored, and imaged, and people will go along with it because 'vanity trumps privacy,' as already proved on Facebook. Wherever attention flows, money will follow." But Kelly, one of the original techno-determinists, may be wrong. Speaking at the Black Hat USA cybersecurity conference in 2015, longtime tech security guru Dan Kaminsky said, "Half of all Americans are backing away from the net due to fears regarding security and privacy. We need to go ahead and get the Internet fixed or risk losing this engine of beauty."
People like Google CEO Larry Page, Facebook's Mark Zuckerberg, PayPal founder Peter Thiel, and Sean Parker of Napster and Facebook fame are among the richest men in the world, with ambitions so outsize that they are the stuff of fiction: Dave Eggers's The Circle and Don DeLillo's Zero K are populated with tech billionaires inventing technology that will enable people to live forever. But this scenario is happening in real life. Peter Thiel, Larry Page, and others are investing hundreds of millions of dollars in research to "end human aging" and to merge human consciousness into their all-powerful networks. As George Packer, writing in the New Yorker, put it, "In Thiel's techno-utopia a few thousand Americans might own robot-driven cars and live to a hundred and fifty, while millions of others lose their jobs to computers that are far smarter than they are, then perish at sixty." Surprisingly, we have just passed through a presidential election campaign where these issues of the future were never even raised.
Modernity was constructed on the idea that individuals are meant to be the ones who decide their own fates, particularly as voters and consumers. But that's not what the techno-determinist future holds. As former Google "design ethicist" Tristan Harris wrote, "If you control the menu, you control the choices." We cede our freedom to choose by giving networks like Google and Facebook control of the menu. How the mysterious black-box algorithms of Google, Facebook, and Amazon determine the menu can never be known by anyone outside those companies. The former editor of the Guardian Alan Rusbridger told a Financial Times conference in September of 2016 that Facebook had "sucked up $27 million" of the paper's projected digital advertising revenue in the previous year. "They [Facebook] are taking all the money," he noted, because "they have algorithms we don't understand, which are a filter between what we do and how people receive it." As more of our lives become digital, these new algorithmic gods will assume more power over us.
This is not the first moral crisis brought on by the techno-determinist point of view. At the end of World War II, in the shadow of the mushroom clouds over Hiroshima and Nagasaki, Christian intellectuals such as Reinhold Niebuhr worried that we were "winning the war, but losing the peace." They thought that if technocrats were credited with winning the war, then those technocrats would manage the postwar world. Niebuhr was prescient on this point, and President Obama acknowledged the dichotomy in his 2016 speech at the Hiroshima Peace Memorial: "Technological progress without an equivalent progress in human institutions can doom us. The scientific revolution that led to the splitting of an atom requires a moral revolution as well." But as one travels through America's Rust Belt cities, where the forces of technology have destroyed jobs, one sees signs of real suffering—high rates of addiction and suicide and shortened life expectancies. What is the technology fix for these cancers of the spirit? The answer escapes me. Or think about the people—celebrities and others—who are subjected to anonymous hate-filled trolls on Twitter. What is the technology solution to this problem?
For all the outrage generated by Edward Snowden over National Security Agency spying, the average citizen has voluntarily (though unknowingly) turned over to Google and Facebook far more personal information than the government will ever have. And even if we are aware that Google's and Facebook's primary business is "surveillance marketing"—selling our personal information to advertisers for billions of dollars—we somehow trust that they will not exploit this information in ways that might harm us. "Google policy is to get right up to the creepy line," Eric Schmidt once told The Atlantic, "and not cross it," a debatable statement at best. As Snowden revealed, Google and Facebook are willing to turn over customer data to the NSA. Now imagine Google under the management of, say, Jeffrey Skilling of Enron fame.
Consider, for example, the ability of Google and Facebook to tweak their algorithms and thereby influence the choice of news stories you see. In 2014, a study led by Robert Epstein, a psychologist at the American Institute for Behavioral Research and Technology, analyzed the extent to which political candidates' Google search rankings could influence voters. Epstein noted, "We estimate, based on win margins in national elections around the world that Google could determine the outcome of upwards of 25 percent of all national elections." And research by Professor Jonathan Albright has shown that right-wing websites have manipulated Google's algorithm to autofill the query "Are Jews…" with the word evil as the top choice. He noted, "The right has colonized the digital space around these subjects—Muslims, women, Jews, the Holocaust, black people—far more effectively than the liberal left."
Google, Amazon, and Facebook are classic "rent-seeking" enterprises. The New York Times columnist Adam Davidson explains the concept:
In economics, a "rent" is money you make because you control something scarce and desirable, whether it's an oil field or a monopolistic position in a market.… The left, right and center of the economics profession all agree that reducing rent-seeking behavior, and improving overall growth, is essential if we want to "make America great again."
Google and Facebook each have more than one billion customers while Amazon has 350 million. They all take their rent off the top, whether through direct payment or advertising subsidy. This rise of the new monopolies happened relatively quickly, so in a way economists and politicians do not fully understand how different monopoly capitalism is from the idealized Adam Smith capitalism that is still taught in economics 101. To begin with, monopolies are price makers, not price takers. As the economist Paul Krugman wrote, "Don't tell me that Amazon is giving consumers what they want, or that it has earned its position. What matters is whether it has too much power, and is abusing that power. Well, it does, and it is."
But the real effect of the fact that American business is tending toward more market-share concentration in all sectors is that corporate profits have been rising and wages stagnating since the 1970s. In a business landscape with high concentration in all sectors, the declining fortunes of the average American worker mirror the predicament of the new musician, filmmaker, or journalist: one must learn how to align oneself to Google, Amazon, and Facebook—the last surviving institutions that will make it possible to earn a living.
These companies did not arrive at their dominant position solely because of the brilliance of their founders, even though the business press would have you believe so. Their monopolies are examples of the effects a political theory called libertarianism, based on the work of economist Milton Friedman and philosopher Ayn Rand, which quite simply posits that government is usually wrong and the market is always right. Strikingly, the Internet was created with government funding and built on the principles of decentralization—principles we need to find our way back to if we are to overcome the power of corporate monopolies in the digital age.
Since 2010 I have run the Annenberg Innovation Lab at the University of Southern California, where I have been lucky enough to work with many of the pioneers of the Internet, including Tim Berners-Lee, Vint Cerf, and John Seely Brown. I was also the founder of one of the first streaming-video-on-demand company, Intertainer, which deployed high-quality video over the Internet ten years before YouTube went online. I am a committed believer in the power of technology. I have used Internet tools such as my blog on Medium to work out some of the ideas in this book. But I'm not sure technology can solve what is primarily a values problem. How do artists derive monetary value from their work, and how do we as a society value art in the digital age? How do we create a sustainable culture that elevates our lives, our spirits, our souls—as did Louis Armstrong and Walt Whitman and Bob Dylan and Stanley Kubrick? You will see that I believe in the power of rock and roll, great writing, and breakthrough movies to change lives. So while I may paint a grim picture of our contemporary digital culture, I hope to show you a way for artists and citizens to help recapture the vision of the Internet pioneers in what I call a Digital Renaissance. Like the historical Renaissance, this one will begin with acts of resistance against digital monopolies. This has already started with a revolt against YouTube by musicians, who were first to feel the effects of digitization. It is now spreading to journalists, filmmakers, and even politicians, including Senator Elizabeth Warren. The TV producer Kurt Sutter (Sons of Anarchy) spoke for many when he said, "Google spends millions of dollars every year fronting a campaign to crush the rights of creatives." In later chapters I will lay out both the breadth of the resistance and some of my own ideas to solve this problem.
But first we need to understand how we got here.
The Great Disruption
"Don't Be Evil"
The beginnings of the technical and social revolution that Martin Luther King referenced in his 1968 sermon at the National Cathedral were under way even as he was speaking. The revolution began in the moral precepts of the counterculture: decentralize control and harmonize people. The earliest networks—like the Whole Earth 'Lectronic Link (WELL), organized by Stewart Brand, the founder of The Whole Earth Catalog—grew directly out of 1960s counterculture. Brand had helped novelist Ken Kesey organize the Acid Tests—epic be-ins where thousands of hippies ingested LSD and danced to the music of a new band, the Grateful Dead. Steve Jobs, founder of Apple Computer, Inc., dropped acid as well. "Jobs explained," wrote John Markoff in his book What the Dormouse Said, "that he still believed that taking LSD was one of the two or three most important things he had done in his life, and he said he felt that because people he knew well had not tried psychedelics, there were things about him they couldn't understand." Brand, Kesey, and Jobs envisioned a new kind of network that was truly "bottom-up." But our hopes that this new kind of network would overthrow political hierarchies and decrease inequality have turned out to be pipe dreams, the fantasies of digital utopians. A New York Times article on a 2016 World Bank report noted, "Internet innovations stand to widen inequalities and even hasten the hollowing out of middle-class employment." How did something so promising go so wrong? As the MIT researcher and early Internet pioneer Ethan Zuckerman wrote, "It's obvious now that what we did was a fiasco, so let me remind you that what we wanted to do was something brave and noble."
The original mission of the Internet was hijacked by a small group of right-wing radicals to whom the ideas of democracy and decentralization were anathema. By the late 1980s, starting with eventual PayPal founder Peter Thiel's class at Stanford University, the dominant philosophy of Silicon Valley would be based far more heavily on the radical libertarian ideology of Ayn Rand than the commune-based principles of Ken Kesey and Stewart Brand. Thiel, who was also an early investor in Facebook and is the godfather of what he proudly calls the PayPal Mafia, which currently rules Silicon Valley, has been clear about his credo, stating, "I no longer believe that freedom and democracy are compatible." More important, Thiel says that if you want to create and capture lasting value, you should look to build a monopoly. Three of the companies that have played the largest role in imperiling artists are clear monopolies. Google has an 88 percent market share in online searches and search advertising. Google's Android mobile operating system has an 80 percent global market share in its category. Amazon has a 70 percent market share in ebook sales. Facebook has a 77 percent market share in mobile social media. The fourth firm, Apple, is not a monopoly because its main hardware business has many competitors. Apple has a role to play in this story, but I will focus on the three digital monopolies that have done the most to alter the relationship between artists and those who support their work.
Perhaps not since the day of John D. Rockefeller's Standard Oil has a single company dominated a market as Google does. While Google and Facebook use their market power to extract monopoly rents from advertisers that are often 20 percent higher than market price, Amazon uses its monopsony (a market structure in which only one buyer interacts with many would-be sellers) to force authors, publishers, and booksellers to lower their prices, putting many of them out of business. This was not the decentralization that the founders of the Internet imagined, but ironically it was the very design of the Internet, with a set of global standards that allowed for massive scale, that led to the winner-takes-all economy of the Internet age.
- On Sale
- Apr 18, 2017
- Page Count
- 320 pages
- Little, Brown and Company